ASIO's Director-General David Irvine said he signed off on the recommendation last night after three to six months of increasing concern.

He said the threat could manifest itself in "many ways", including in a bombing similar to the one in a Bali nightclub in 2002.

"It could manifest itself in a Bali-type attack or it could manifest itself in the various other sorts of attacks from loners through to small groups to large activities such as Bali that we've seen elsewhere in the world," he said.

"They're the sorts of things that we're concerned about."

Muslim community leader Dr Jamal Rifi says he is not surprised that the terror alert has been raised, saying Muslims must be part of the battle against the threat of terrorism.

"If there is anything that is going to happen in Australia it's going to affect us as a Muslim community more than anyone else," he said.

"Unfortunately we may have some young, hot-headed people and we need to tell them, if you care about this community we will love you, we will care about you, but, if you are going to harm this country or its citizens in any way, we will be the first to jump on you."

More security at airports, government buildings: Abbott

Raising the alert levelis likely to trigger increased security and a bigger police presence at upcoming football finals and other large public events. It also comes just two months before world leaders are due to gather in Brisbane for the G20 economic summit.

But Mr Abbott said most Australians will not feel any difference in "daily life" and that "normal life in Australia can and must go on".

"What people will probably notice though is more security at airports, more security at ports, more security at military bases, more security at government buildings, and more security at large public events," he said.

He said "regrettably" there are some Australian citizens and residents who would "do us harm".

"People coming back from the Middle East, militarised and brutalised, accustomed to kill without compunction, do pose a significant threat to our community should they not be under the closest possible supervision," he said.

"The best place for most of those people, given they've broken our laws, is in a maximum security prison."

Acting Commissioner of the Australian Federal Police Andrew Colvin said the extra security would not be "intrusive".

"I want to reassure the public again that we want them to be aware, but assured. They may see more police, but it won't get in the way of them," he said.

The Federal Opposition and state and territory leaders were briefed earlier Friday on the change.

Queensland Premier Campbell Newman said football fans may be affected this weekend.

"Major sporting events, mass gatherings - you may see additional security, you may see queuing as bags are checked etc, so for example the Broncos-Cowboys games in Townsville on the weekend," he said.

NSW Premier Mike Baird has asked people to be patient.

"There may be some inconvenience but your patience will help as we put in place the measures required to deal with what we are facing," he said.

New counter-terrorism legislation expected later this month

But both Mr Abbott and Mr Irvine denied that any increased involvement by Australian forces in the US-led military action against Islamic State contributed to the decision to raise the alert level.

"Should at some point in the future the Government decide to add to the humanitarian work that we are already doing in the Middle East, I'm sure the rhetoric from some of these organisations will increase, but I think we can be confident that that would merely be an excuse, not the reason," Mr Abbott said.

Mr Irvine added that his decision was taken on the basis of "Australian factors as they exist now".

The Government wants to bring in new laws to target so-called foreign fighters and give security agencies more powers to tackle terrorism, including increased access to phone and computer records.

It has been holding regular talks with Muslim leaders and Mr Abbott wants them to know the alert level is not about a "particular community".

"The phrase I like is Team Australia, and the beauty of Team Australia is anybody who is prepared to show a commitment to this country is part of it," he said.

Attorney-General George Brandis said the proposed laws, which are likely to be introduced to parliament later this month, were designed "to protect them and their interests and their communities".

Threat levels around the world

USA: no current alerts

UK: severe

Germany: no specific alerts

France: no specific alerts

Indonesia: high

"All of us as Australians are potentially victims of these wicked people, but the Muslim community in particular is exposed," he said.

A "modest" public awareness campaign about the alert levelwill be launched in the coming weeks and the Prime Minister has urged people to report any concerning activity to the national security hotline - 1800 123 400.

Late last month the United Kingdom raised its alert from "substantial" to "severe", meaning that the threat of an attack was rated "highly likely".

Threat elevated for the first time since 2002

It is the first time Australia's alert level has moved up from medium in more than a decade and Mr Abbott said it could return to lower levels if the current indicators of a greater threat subsided.

"If the numbers participating in terrorist groups in the Middle East were to reduce, if the potency and power of those terrorist groups in the Middle East were to be degraded, if the numbers supporting them were to reduce, if there were no exhortations coming from the Middle East to supporters here in Australia - if all of those things were happening, obviously that would be a sound basis for our experts to reduce the threat level,' he said.

In 2002, the Government issued a general warning of a credible threat to mainland Australia by Al Qaeda.

Since 2003, Australia's national terrorism public alert system has had four levels:

Low - terrorist attack is not expected

Medium - terrorist attack could occur

High - terrorist attack is likely

Extreme - terrorist attack is imminent or has occurred

The current four-tier system replaced a three-level system.

The national terror alert level is raised on advice from the ASIO chief.

Mr Irvine is in his last week in the job and will soon hand over the reins to former special forces chief, senior diplomat and Defence department secretary Duncan Lewis.

In her resignation from politics, Kelly O'Dwyer said she feared another miscarriage in Canberra, far from home. Her announcement is shocking for more than just party-political reasons, writes Emma A. Jane.